On Wednesday, amid high inflation, the United States Fed decided to hike interest rates by 0.75 percentage points for the fourth straight day, but hinted at smaller hikes as it assesses the impact of its aggressive monetary tightening. At a two-day meeting of the policy-making Federal Open Market Committee, the central bank said it will raise its target range for the fed funds rate to 4 from 3.75.00 percent, as widely expected, the highest level in about 15 years.
While noting that continued rate hikes would be "appropriate" to bring inflation down to its 2 percent target over time, the central bank added that it would "anticipate cumulative monetary tightening, delays in that monetary policy, which are affecting economic activity and inflation, and "economic and financial developments" to set the pace of future increases.
Fed Chair Jerome Powell said "the time has come" to discuss slowing rate hikes. " It may come as early as the next meeting (in December) or the next," he told a news conference, adding, "No decision has been made yet. It's likely that we'll have a discussion about it at the next meeting.
But he said it was "very premature" to think of a pause in rate hikes and incoming data like consumer prices, as the latest meeting in September suggested "the final rate level will be higher than previously expected In. In its September forecast, the Fed predicts its interest rate will reach 4.4 percent by the end of this year and hit 4.6 percent in 2023 before cuts are made in 2024, pushing the world's largest economy into recession, Powell said of the way to the so-called soft landing of the USA.
The economy is picking up, although he thinks it's still possible. The US economy shrank for the first six months of this year, falling into a so-called technical recession for two consecutive quarters of negative growth. However, preliminary data showed that the country's gross domestic product grew at an annual rate of 2.6 percent in the July-September period.
Prospects of increasing policy divergence between the Federal Reserve and the Bank of Japan, which has maintained ultra-low interest rates, have caused the yen to weaken against the US dollar. In May, following Russia's war in Ukraine, the Fed raised the target range for the federal funds rate by half a point for the first time since 2000, after ending March with interest rates close to zero. At the June meeting, the Fed delivered its largest rate hike of points since November 1994, starting with a 0.75 point hike.
It then approved rate hikes of the same amount at its July and September meetings. When interest rates increase, the Federal Reserve typically increases the number by 0.25 points.
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